NZ banks spur rate of lending
AUCKLAND: New Zealand’s nine major lenders boosted lending at the fastest quarterly pace in almost two years as fears over bad debts subsided.
Banks canvassed in KPMG’s quarterly financial institution performance survey increased gross loans 1.6% to $412.21 billion in the three months to June 30, the biggest quarterly credit expansion since September 2016. Heartland Bank led the way at 2.69%, while Bank of New Zealand expanded its loan book 2.01% in the quarter, the most of the big four.
The lenders reported net profit of $1.42 billion, of which ANZ Bank New Zealand, BNZ, ASB Bankparent Commonwealth Bank of Australia and Westpac New Zealand dominated with $1.34 billion. That compares with $1.19 billion in the June 2017 quarter, when the big four generated the same level of earnings. The yearearlier period included a $32 million loss for stateowned Kiwibank while the remaining New Zealand minnows posted combined profits of $37 million.
The quality of lenders’ loan books improved in the latest period. The ratio of impaired asset expenses was just 0.05% of gross loans, compared with 0.17% in the March quarter.
‘‘Following a minor setback last quarter, asset quality appears to have recovered, with results showing lower impairment expense and relatively stable provisioning,’’ KPMG head of banking John Kensington said.
‘‘This trend indicates that the downward spike in the previous quarter was likely driven by a variability of results rather than a clear signal of a turning point in the market cycle as speculated.’’
However, Mr Kensington said provisioning levels were still at higher levels and could be an early indicator of change.
Banks increased their riskier mortgage lending this year after the Reserve Bank loosened restrictions on high loantovalue ratio finance from January. That has resulted in a growing appetite to back the Government’s KiwiBuild policy and firsthome borrowers in general. Kiwibank is pitching loans to buyers with less than a tenth down and ASB says some borrowers may need only a 5% deposit.
The lenders clamped down on costs in the latest quarter. The ratio of operating expenses to operating income fell to 39.21%, compared with 40.95% in the March quarter and 44.82% a year earlier. Net interest margins shrank 10 basis points to 2.1%, although they were 7 basis points wider than a year earlier. — BusinessDesk